Submitted by Alan Collinge, Mar 14, 2007 07:24

Mr. London fails to recognize that the Monopolistic leader of the FFELP industry- Sallie Mae-has abused borrowers in the FFELP program to the point where it's record profits are attributable to penalties and fees collected on delinquent accounts.

In fact, under the current FFELP program, it can be far more profitable for the lenders when the borrower defaults, since they are guaranteed nearly full book value on the loan, and typically get a second bite of a much larger apple when the loan balance explodes with penalties fees and accrued interest. Oh, and did I mention that the Sallie Mae lobby has effectively killed attempts to open up this market to competition through refinancing? Once students consolidate with Sallie, they can never leave. Under these conditions, Sallie Mae has no interest in providing adequate customer service and loan administration.

Further, the industry claim that defaults are at record lows are suspect at best, and purposeful misrepresentations at worst. The default metric, known as the "cohort default rate" is easily manipulated by the loan holders for their own purposes.

Who would have thought 10 years ago that decent citizens would be killing themselves, fleeing the country, and living in fear of their government because of student loans? Ridiculous.

While I'm not taking sides in the FFELP vs. Federal Loan debate, I am saying that the FFELP program- if it is to remain- is in need of massive reform.

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